44. Memorandum From the Ambassador to France (Bohlen) to the Deputy Under Secretary of State for Political Affairs (Thompson)/1/

Washington, February 23, 1965.

/1/Source: National Archives and Records Administration, RG 59, Bohlen Papers: Lot 74 D 379, M Corresp. Secret.

SUBJECT
Luncheon Conversation with Defense Secretary McNamara

I thought you might like to have a record of my luncheon conversation with McNamara, although nothing very startling occurred.

1. Treatment of France. McNamara completely agreed with me that the decision in regard to the supplying of U-235 to France was not a question of the agreement per se, but was a policy decision which could interpret the agreement in the desired light. He also agreed that what we were talking about affected basic policy towards France and that there should not be a refusal of the U-235 except in connection with a basic examination of our attitude towards France. We speculated somewhat on the possibility of utilizing the U-235 question as a means for inducing France to accept some of the expeditions, particularly the Gemini recovery unit in the Pacific, which the French had turned down. I told McNamara that if this were to be done, it should be done very subtly and at a relatively low level, since de Gaulle was notoriously adverse to any attempts to use direct pressure on him.

Incidentally, John McNaughton, whom I saw over there before lunch with McNamara, said that he stood one hundred percent for refusal to the French of the U-235 on the grounds that he was completely opposed to giving any material or information to any country which would help it develop nuclear strategic capability. He said his position was based on the desire to prevent the spread of nuclear weapons. He also told me, in reply to my question, that he was in favor of changing the McMahon Act/2/ so as to exclude Great Britain in the future. When I asked him how he thought that would prevent the Chinese, or, conceivably the Indians, he admitted that he didn't see how it would, but insisted on his main position.

/2/The McMahon Act, P.L. 585, formally the Atomic Energy Act of 1946, approved August 1, 1946, forbade all exchange of atomic energy information with other nations, even in areas having no perceptible military bearing. (60 Stat. 755)

2. Strategy. McNamara agreed with me that there was really very little substance to the difference in French and American strategy but agreed that the French would certainly try and utilize this to prevent certain NATO exercises on its soil, asserting, however, that what she was defending was previous NATO strategy from amendment or change. I told McNamara that I could only see three contingencies in Europe on which the issue of conventional forces versus nuclear were derived:

a) Berlin
b) A revolt in East Germany or other Communist country in Europe
c) A Communist coup or revolt in a NATO country.

I said that aside from these, I could not agree that the Soviets would contemplate an invasion of Western Europe without having first taken us out or attempted to in a nuclear strike. McNamara seemed to agree with me but said that he thought that the three contingencies I had mentioned were sufficient to justify the development of a strategy, as he saw it. I told him that while I had always understood that his strategy would not refuse to use nuclear weapons in the event that this became necessary to protect Europe, to which he agreed, it had nevertheless been interpreted in Europe and exploited by de Gaulle as an indication of American reluctance to risk her cities to the defense of Europe. I told him that I thought that a clarification from some authentic American voice might be worthwhile considering for the future.

I merely submit this memorandum for the record in case the subject comes up in my absence.

45. Telegram From the Embassy in France to the Department of State/1/

Paris, March 11, 1965, 5 p.m.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL FR-US. Secret. Repeated to Bonn, London, Moscow, Rome, The Hague, Brussels, and Luxembourg.

5144. Three weeks after Foreign Minister's return from US, it might be worthwhile take stock present status US-French relations as seen from here. Unfortunately despite all-out effort which was made in Washington to discuss matters in fullest spirit friendship with Couve, French Government has not behaved in fashion befitting an old ally in recent weeks and there are abundant signs both latent and apparent of stress in our official relations.

In view its role as number one topic among our foreign problems, Vietnam has held special significance in our relations with France recently. We will not repeat here abundant evidences of Franco-American differences on Vietnam as these have been repeatedly reported by Embassy. Furthermore it is not so much fact French policy differs from ours that causes us concern but particularly exasperating way in which French keep reiterating their call for an international conference without preconditions and apparently deliberately misunderstanding our viewpoint.

It will be recalled that within matter of hours following Couve's return from US on February 24 Information Minister Peyrefitte issued call for Franco-Soviet "concert" of policy on Vietnam. On subject Franco-Soviet relations incidentally Paris is, of course, full of rumors of impending closer ties between two continental states whose interests parallel in some instances (see Embassy Airgram 2008, March 10, 1965)./2/ There is little hard evidence of any sharp alteration in these relations except appointment Zorin to Paris seems indicate tendency on part Soviets get French to "put up or shut up" particularly on European and German matters and to some extent responds to French nibbles.

/2/Not printed. (Ibid., POL FR-USSR)

Effect of French attitudes towards Soviets inevitably has repercussions on relation with US and impression is widespread in Paris that de Gaulle policy towards Soviets intended annoy US as much as anything. Embassy does not believe situation calls for alarm on our part or indeed any special notice of French flirtation with East at all beyond occasional reminders this is not passing unnoticed, especially since French do not seem to be getting anywhere. However, indubitably impression is left here that de Gaulle policy of increasing independence from US is furthered by recent developments in French policy towards Soviet Union. Thus net effect despite fact French have made relatively little headway is to give impression further deterioration US-French relations.

While nuclear control question within Alliance is dormant for moment in French mind it could spring back into limelight if current

German-British discussions lead to call for multilateral meeting on subject. French impression is that major victory over US achieved last December when MLF as then conceived not pushed further./3/ Since it remains unclear that new formula has been found, French at moment passive. However they have made clear their unswerving opposition to any form of Allied Nuclear Force and will return to charge if we seem to be getting off dead center. Furthermore French at moment consider they have upper hand over US because they do not believe other allies will ever find formula that can be successfully "sold" at least prior German elections. This issue then remains quiet but potential major explosive issue in US-French relations if situation changes.

/3/For documentation, see Foreign Relations, 1964-1968, vol. XIII, Documents 63-65. For text of the NATO communiqué, see American Foreign Policy: Current Documents, 1964, pp. 507-508.

In other European fields our relations with French less tense. French have retreated from de Gaulle press conference implication that US (and UK) should not be concerned with German problem. This is probably tactical move however and appointment Zorin may presage Soviet effort deal with French on German problem without US. For moment this also quiescent though French still seek give impression that US is attempting break down smooth running Franco-German partnership and that we seeking exclusivity in our relationship with Federal Republic.

In more general field European integration French, of course, less directly at odds with US because of our non-membership in "Six." However, it is clear that despite encouraging noises made at Rambouillet by de Gaulle, French do not intend to take initiative on tentative agreements reached there towards calling series of meetings at high levels during spring and summer to attempt make progress in integration field. On contrary every indication we have here is to effect French, while ostensibly ready to listen to other five, are making no moves towards implementation Rambouillet at this time and we have been categorically told this is case by de Gaulle (Embtel 3873)/4/ [and?] by pertinent Foreign Office officials.

/4/Telegram 3873 from Paris, January 8, reported that during discussions with Bohlen, de Gaulle stated that he saw no important question affecting NATO arising in 1965. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 15-1 FR)

In purely bilateral questions matters have also not been going too well. Without entering into relatively minor irritants, French attitude towards US requests for assistance with important scientific projects (including Apollo-Gemini) involving Tahiti indicates unjustified suspicion US motives in area. Their failure give US clearcut approval in these cases appears to us to be clearly motivated by suspicion in connection with French nuclear tests scheduled for this area.

French public attacks on present international monetary system on ground it gives special position to dollar and unjustified advantages to United States are significant irritant in our bilateral relations and cause us some difficulty in multilateral discussions. While some elements of these French views are often sincerely held by technicians and specialists, it is hard to escape conclusion that the special twist they have been given in recent months is motivated at least partly by political desire to strike new blow for "independence" from the United States.

Coupled with above outline of substantive problems in our relations, official radio and TV plus UNR press continues sniping at US along lines reported.

Should above summary indicate lives of American residents and Embassy personnel in Paris in any way personally difficult, it would give totally erroneous impression. Curiously enough atmosphere and attitudes French public generally appears more friendly than during difficult days of Fourth Republic through which France passed. Present French outlook seems one of self-confidence and self-reliance (partially of course caused by Fifth Republic) in which dependence on US has disappeared. As result anti-American attitudes among French public seem to have waned, perhaps partially as reaction to Gaullist policies. Difficulties reported above are almost entirely on government-to-government level and appear largely reflect personal policies of General de Gaulle which in many cases are opposed, largely ineffectively, by his own officials. Nevertheless, finally it should not be concluded that our problems with France are nearer to solution because French public remains almost entirely friendly to US.

Bohlen

46. Telegram From the Embassy in France to the Department of State/1/

Paris, April 24, 1965, 1111Z.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 1 FR. Secret; Exdis. Repeated to Moscow, Bonn, and London.

6008. Ref: Embtel 5514 (not rptd info addressees)./2/ Impact of Gromyko visit to Paris next week/3/ on future French-Soviet relations and on European scene generally will be difficult to judge until the event has taken place. It seems especially prudent to reserve judgment before and since it appears that both Russians and de Gaulle are seeking to profit from secondary, or psychological, effects of rapprochement they are cautiously exploring. This tends to obscure realities of Franco-Soviet relations. Neither side can go very far without creating unpredictable and dangerous consequences to their rear: for the Soviets, too much truck with Gaullist ideas about "greater" Europe could have unsettling influence on Soviet position in Eastern Europe; for the French there are the obvious dangers of undermining French influence in FRG and French leading position in EEC. We therefore think that talk about reversal of alliances and a Franco-Soviet "deal," prevalent in much opposition press speculation, seriously misses the point.

/2/Telegram 5514 from Paris, March 31, reported on the increasing signs of dissatisfaction with de Gaulle's foreign policy among French elites. (Ibid.)

/3/Gromyko visited France April 25-30.

As suggested in reftel, one cannot feel entirely confident that de Gaulle will give nothing of importance away to Soviets. De Gaulle's Asian policy (Vietnam, SEATO) and failure thus far to help Erhard in latter's efforts to make some progress in European integration before FRG elections, despite fact de Gaulle apparently allowed Erhard to leave Rambouillet/4/ thinking he had such a commitment, are not encouraging signs. On other hand, Quai officers have tried to assure US, and apparently FRG Embassy as well, that we needn't worry about Gromyko visit. Quai characterizes it as merely probing exercise, such as that periodically conducted by US and UK with Soviets, and claims de Gaulle is fully aware of its dangers and limitations.

/4/They met in Rambouillet January 19-20; for text of the press release by the German Government, see Keesing's Contemporary Archives, 1965-66, p. 20707.

It seems to us that what Soviets obviously would like to get out of France at this stage is some form of recognition of status quo in Germany. De Gaulle's Feb 4 press conference/5/ may have encouraged them to hope they can get French to accept language more favorable to GDR than anything French have previously agreed to multilaterally or stated themselves unilaterally through de Gaulle's speeches or press conferences. We believe, however, that French are fully aware of possible adverse consequences this might have in FRG, fresh reminder of which was German press treatment of recent exchanges of correspondence between de Gaulle and Adenauer and Erhard.

/5/For text, see American Foreign Policy: Current Documents, 1965, pp. 476-478.

There remains possibility of some kind of friendship or non-aggression pact being concluded. However, we think this prospect very remote, particularly since Gromyko visit (with return Couve visit to Moscow) is only first chapter of Franco-Soviet dialogue. More likely possibility would be for de Gaulle to move step closer toward committing himself to visit USSR, which Soviets have been pressing him to do repeatedly.

Itemized below are what we consider will be main topics dominating discussion during Gromyko visit:

1) Germany. The French have made no effort to disguise that Western security and/or Germany will be main item on agenda. From de Gaulle's standpoint, it would be risky to jettison all prospects for his continued popularity with certain sectors of German opinion by overt indications of his presumed desire to see Germany indefinitely divided. However, his Feb 4 press conference placed German reunification in realm of distant future where this could be acceptable to Germany's eastern as well as western neighbors. Numerous statements recently made on formal occasions by Ambassadors Vinogradov and Zorin here in Paris to effect that France and USSR are primarily responsible for European security, and de Gaulle's happy acquiescence of this echo to his own thesis, suggest this may constitute basis for expressing "common views" or "mutual interest" in joint communiqu&#eacute;which doubtlessly will be issued. Absence or tardiness of public concern in German quarters (at least as far as we can judge from here) over implications of de Gaulle's Feb 4 press conference, would, we would imagine, encourage de Gaulle to pursue theme that German reunification is exclusively concern of European countries, rather than matter also primarily affecting US or even UK. On other hand Quai publicly denied any French intention depart from quadripartite responsibility for settling German problem after Feb 4 press conference and same assurance was given to Secretary by Couve during latter's visit to Washington.

2) Vietnam. Here seems to be even less basis for genuine dialogue, despite previous French expressions of readiness to concert policy with USSR to end hostilities. While de Gaulle doubtless would be delighted to claim or jointly share with USSR credit for moves leading to an international settlement over Vietnam or better yet a "great power" concord on Southeast Asia, this vision of glory apparently has shrunk as events have escalated far beyond the possible diplomatic impact of communiqués issued by MinInfo Peyrefitte after Elysee Council of Ministers' meetings. Nevertheless, it possible that Kremlin and Elysee will try to agree on some vague language expressing desire for a negotiated settlement--fuzzing over issue of what conditions, if any, should precede them. On this matter Russians also operate under obvious limits imposed by other members of socialist camp.

3) Eastern Europe. Although it safe bet that future status of Eastern Europe will be omitted from communiqué, and probably even from forthright private discussion, this problem will remain in background as reminder of wide gulf that really exists between France and Russia regarding Western security. Sore point with Communists, which we sensed from Soviet diplomats here and which has been strongly registered by French Communists, is Gaullist theme that Eastern European countries, not to mention USSR, must "evolve" out of Communism to merit inclusion in de Gaulle's "enlarged Europe." Such evolution is quite fundamental to de Gaulle's concept of a Europe free from US "hegemony." Although former Soviet Ambassador Vinogradov apparently succeeded in getting some influential French circles to believe that USSR has changed sufficiently to permit early consideration of Franco-Soviet cooperation in place of France's present reliance on its Western allies for security, we doubt that when it comes down to discussing brass tacks with Gromyko and Zorin, de Gaulle will find there is hope for early realization Europe from Atlantic to Urals.

One related but not unimportant factor which may also influence de Gaulle in his flirtation with Soviets is effect which ostensible rapprochement with Soviet Union may have on French Communist Party in connection with presidential election this December. De Gaulle undoubtedly hopes that some PCF voters will vote for him (or his heir) and partial justification for such vote could be provided through improved Franco-Soviet relations./6/

/6/For text of the communiqu&#eacute;issued at the end of Gromyko's visit, see ibid., pp. 522-523.

Bohlen

47. Telegram From the Embassy in France to the Department of State/1/

Paris, May 4, 1965, 2020Z.

/1/Source: Johnson Library, National Security File, Memos to the President, McGeorge Bundy, Vol. 10. Secret; Limdis. Repeated to London and Bonn.

6237. Germany and Europe: I told General de Gaulle that I thought some clarification from him as to what particular differences he saw between France and the United States in regard to Europe might be useful if he would give them to me. He immediately said that he did not think that our differences were really very much a matter of principle; he thought more a matter of time and he emphasized in this connection that when he said reunification of Germany would result from the evolution of Europe he did not in any sense envisage that the U.S. would not participate in and be a party to any final arrangements for the unification of Germany. He did think however that any unification would require the consent of the neighboring states as to frontiers, which was obvious, and also, he felt, a prior agreement somewhat like the Paris Agreements in regard to the prohibition of nuclear weapons. He said in this connection Germany lost the war and should be expected to pay for it.

On the subject of Europe he made the interesting comment or charge that the other members of the Six, Germany, Italy, Holland, Belgium, Luxembourg, were not in favor of the unification of Europe because it was very convenient for them to have America assure their security and conduct their foreign policy. I told de Gaulle that I had understood that the Germans in particular were pressing for action in regard to European unification, which he dismissed with a wave of his hand on the ground that Erhard was in an election year and would make these gestures but really didn't mean them very much.

De Gaulle however did not seem willing to pursue the subject of the attitude of the other European countries towards European unification.

The conversation then led into the subject of NATO which will be covered in a separate message./2/

/2/For Bohlen's report on this part of his discussion, see Foreign Relations, 1964-1968, vol. XIII, Document 83. Bohlen also reported on his discussion with de Gaulle about the Gromyko visit in telegram 6236 from Paris, May 4. (Johnson Library, National Security File, Memos to the President, McGeorge Bundy, Vol. 10)

Bohlen

48. Telegram From the Embassy in France to the Department of State/1/

Paris, May 20, 1965, 1919Z.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 15-1 FR. Secret.

6614. During a call on Couve de Murville today I took occasion personally to tell him that I was concerned when General de Gaulle made a speech about Yalta and distorted the meaning and significance of this Conference./2/ I had been genuinely sorry to see the old thesis repeated by the General yesterday in his speech yesterday at La Roche-Sur-Yon to the effect that Yalta had brought about the division of the world. I told Couve that having been there I could tell him that this had no relation to reality whatsoever and that the American document on the "Declaration on Liberated Europe"/3/ was on the contrary specifically designed in an endeavor to prevent the Soviets from dividing Europe.

/2/For text, see de Gaulle, Discours et Messages, Vol. 4, pp 354-358.

/3/For texts of the U.S. draft and the final version of the "Declaration on Liberated Europe," see Foreign Relations, 1945, The Conferences at Malta and Yalta, pp. 862-863 and 977-978.

Couve said he thought he would mention this to General de Gaulle to which I replied that the General knew full well that I had been at Yalta and I felt it would do no good.

Further on in the conversation I told Couve that I was really concerned that the current line of French policy would begin to have a very serious effect on American public opinion as distinct from the government. I said that when there was military action and losses began to come in the people who had lost a son, brother or other relative would not go into the nuances of political positions but would simply ask the question who was with us and who against.

Couve said he realized the danger on this score and said he understood the particular role of public opinion in foreign relations and execution of American policy. He made no offer, and I did not seek any, to do anything about this but I do believe the thought was registered with him.

Bohlen

49. Memorandum From Horace Busby of the White House Staff to President Johnson/1/

Washington, June 10, 1965, 1:45 p.m.

/1/Source: Johnson Library, National Security File, Memos to the President, McGeorge Bundy, Vol. 11. No classification marking. A handwritten notation reads: "For Bundy for comments to me. L" No written comments have been found.

SUBJECT
Conversation, Ambassador Alphand

I am sure you will be interested in various comments made to me within the past several days on his own initiative by the Ambassador of France, who has just returned from a visit to Paris.

1. Alphand says the "poor relations between France and America are a figment of the journalists in both Washington and Paris." He says that among the people, outside Government, he finds no anti-American sentiment in France and little other than pro-France sentiment among Americans. "All of this," he says, "is salon talk among a limited number of people in or on the fringes of our Governments."

2. Alphand says, "Whatever is said in Paris, France will always be with you when we are needed. The average Frenchman knows this, just as the average American knows it. Your President is being misrepresented by his press, so is my President--except that my President has more trouble with cartoonists in both countries than your President has in either country. The journalists want to keep alive the fight that was started before your President became President--and President DeGaulle knows that President Johnson has discouraged the people in your Government from keeping that fight alive."

3. Alphand says, "Mr. Martin made a speech that has been badly reported in this country./2/ If you will read it carefully, he is only saying that the Western countries should look at the international monetary situation and its problems and do some things about that which have not been done all through these post-war years. What Mr. Martin says--if you forget his remarks about 1929--is only the same thing that General DeGaulle and Mr. Rueff have been saying too. When General DeGaulle talks about gold standards, he doesn't have a Council of Economic Advisors guiding him on what he says--he just has Mr. Rueff. The General does not know much about gold or international monetary matters. What he has asked for, I believe, is not a return to the Gold Standard as much as he has asked the allies to look for a better standard than what we have now. I think many people in your Government feel the same way, although they would not follow the same way that General DeGaulle suggests. President Johnson has a fine opportunity to take leadership in this field that has been neglected by too many people in my Capital and your Capital, too."

/2/In a June 1 address William McChesney Martin, Chairman of the Federal Reserve, opposed a rise in gold prices, a return to the gold standard, or the delegation of monetary policy to an international agency. A summary of his remarks is in The New York Times, June 2, 1965.

Comments: I am not sufficiently informed to make judgments about this, but some of the Ambassador's observations, made on and at his own initiative, seem to be in the nature of an overture. Perhaps others could explore this more usefully and more intelligently than I.

Buzz

50. Memorandum of Conversation/1/

Washington, July 8, 1965.

/1/Source: Johnson Library, National Security File, Country File, France, Vol. 7. Confidential. Drafted by McGrew on July 12. The memorandum is an "Uncleared Draft."

PARTICIPANTS

United States
Frederick L. Deming, Under Secretary of the Treasury for Monetary Affairs
D. J. McGrew, U.S. Treasury Representative, Paris

France
Valéry Giscard d'Estaing, Minister of Finance and Economic Affairs
Maurice Perouse, Director of the Treasury, Ministry of Finance

Mr. Giscard d'Estaing opened the conversation with the remark that he had seen somewhere a report that Secretary Fowler would be coming to Europe later in the summer. He asked whether this was correct.

Mr. Deming replied that while it was possible the Secretary might make such a trip before the Bank and Fund meetings, the chances were rather against it./2/ However, as it had been pointed out in the press communiqu&#eacute;on the Fowler-Callaghan talks,/3/ the Secretary did hope to have bilateral talks during the months ahead with other Finance Ministers, including of course Mr. Giscard d'Estaing. The Bank and Fund meetings would provide one opportunity for such discussions, and we had been glad to learn from Mr. Larre that the Minister was planning to attend those meetings. On his side, the Secretary was hoping he would be able to make a trip to Europe for further discussions with some of his European colleagues sometime later in the year.

/2/Fowler attended the IMF meetings. Deming reported on his talks with Giscard in telegram 1091 from Paris, August 31. (Ibid.)

/3/Not found. A memorandum of Fowler's conversation with Callaghan, July 1, is ibid., Bator Papers, Callaghan Visit.

Mr. Giscard d'Estaing said, apropos of the Fowler-Callaghan talks, that there had seemed to the French to be some contradiction between the impression given by the communiqu&#eacute;and the remarks made by Chancellor Callaghan following his return to London on the question of international liquidity and the reform of the monetary system.

Mr. Deming said there had been some discussion during the talks of the liquidity problem, but it had been one among several items on the agenda, and had not consumed a disproportionate amount of time. Much of the discussion had been devoted to specific problems: e.g., the action being taken by the British to liquify their official portfolio of U.S. securities and its effects on the U.S. balance of payments, and the revision that would be needed in the Anglo-American Tax Treaty as a result of the reform which the British had undertaken of their corporate tax law. The communiqu&#eacute;was a fairly accurate summary of the talks, naturally not going into the details of the discussion, but reflecting quite well the amount of time devoted to the various topics discussed.

Mr. Giscard d'Estaing said he had two points which he wished to discuss with Mr. Deming: the current international payments situation, as reflected in the position of France herself, and the problem of international monetary reform. On the first topic, the French were continuing to experience heavy inflows of foreign exchange. In June, French reserves had, it is true, increased by only $9 million. However, after adjusting for the scheduled payments of $33 million in principal and interest on the debt to the U.S. and Canada, and for the purchase by the British of $100 million against francs received in the IMF drawing, the real inflow had been $142 million. On last Wednesday (July 7)--the day of the week on which foreign exchange receipts are concentrated--they had taken in $19 million. Thus the trend seemed to be continuing in July. The impression of the French authorities is that this continued inflow is the counterpart of the weakness of sterling. For their part, they have done what they could to discourage the movement of foreign money to Paris: They have reduced their interest rate levels, forbidden the payment of interest on foreign-owned franc balances and taken steps to curb foreign investment operations in France. They do not feel that the problem of the persistent payments imbalance is their concern. But they continue to be aware of its existence through the growth of their reserves, and the Minister wanted to flag this point for his American friends.

Mr. Deming said on the subject of the growth of French reserves there was one technical point which he would like to raise. We understand the reasons behind the French policy of converting all reserve increases into gold. Thus the present question is not directed at the rationale of that policy; we would, however, appreciate knowing whether the French authorities, in deciding each month on how much to convert, make their calculations of reserve increases on a gross or a net basis.

Mr. Giscard d'Estaing said this was indeed an important point. In the case of the June figures, if the calculations were made on a gross basis, the conversion would be $109 million, whereas, calculating on a net basis, it would be only $33 million. On this point, the Minister continued, his staff favored using the net basis, whereas in theory he felt the gross basis was the proper one. After all, the gross figure represented the amounts of reserve currency which France had received as a result of its external economic and financial operations during any given month. It was a point to which the French authorities would have to devote a little further thought. In the case of June, however, to convert on a gross basis would mean losing the good effects of the $178 million debt prepayment. For this reason it seemed likely that the July conversion would be effected on a net basis and would thus amount to $33 million. In other words, the French authorities were leaning towards the net basis for practical rather than theoretical considerations.

Mr. Deming recalled the Minister's earlier comment that on a net basis, the growth of French reserves in June had been only about $9 million.

Mr. Giscard d'Estaing said that while this was true, it had been decided at the beginning of the year, as we knew, that the Bank of France would continue, as in 1964, to purchase 30 tons of gold every month and then in the following month would adjust its purchase to make up the difference between the 30-ton minimum and the actual growth of reserves during the month in question. Thus the monthly conversion figure for July would be 30 tons, or about $33 million, rather than $9 million. Moreover, it was certain that the inflow of foreign exchange during July, even if it continued to be heavy, would not exceed the $178 million outflow represented by the debt prepayment, so that in August the conversion would also be $33 million.

Mr. Giscard d'Estaing then turned to the question of the international monetary system. He recalled that the French experts had put forward certain ideas concerning how this reform might be accomplished. It was not the intention of the French monetary authorities to continue pressing any specific scheme, however. What they would continue to do was to point out the need for reform, for they were convinced that the events of recent days had not made that need any less urgent--indeed, quite the contrary. They continued to be concerned regarding the weakness of the British position from both an economic and a political viewpoint. The timid deflationary measures taken by the British authorities would probably have whatever effects they would be going to on the British internal economic situation during the present third quarter of the year. Seasonally this quarter was the least favorable for the British balance of payments. Thus the prospects were for the conjunction of an unfavorable domestic economic performance and poor balance of payments results. This could very well produce a new currency crisis of a considerable magnitude before the end of the year. In the French view, such an outcome would be a real pity, for a reform of the international monetary system could not be carried out in such an atmosphere. No matter what was said, public opinion would interpret any "reform" undertaken in the wake of a currency crisis as merely a camouflage of a new set of measures taken to shore up the British position. The French authorities recognized that it was not for them to initiate the necessary action to deal with the unhealthy situation. They had done what they could to call attention to the problem. Now it was up to those upon whom fell the major responsibility for the functioning of the present system--namely, the reserve currency countries--to accept that responsibility and decide how they wanted to deal with the problem.

Mr. Deming said that he was pleased to hear the Minister say that the French did not intend to press for the acceptance full-blown of their particular proposals. In the U.S. view, the fastest and best way to make progress in considering international monetary problems was for all those participating in discussion of the matter to keep an open mind. For its part, the U.S. Government had no specific "plan" for reforming the monetary system. We had been considering the problem, and we felt that by continuing the exchange of views with the other countries principally concerned, we could during the months ahead move closer to a meeting of the minds than might seem possible today.

Mr. Deming said that as for the British problem,/4/ he did not share the Minister's forebodings. He expected that the measures already taken by the British authorities, together with such additional measures as they might see fit to take in the period ahead to reinforce their program, would begin to show results in the near future. If one agreed with the analysis that the problem of sterling was to a considerable extent a matter of confidence, the evidence that the British authorities were succeeding in their efforts to bring the economy under control could result in a substantial turn-around in their foreign exchange situation.

/4/Reference is to the third emergency budget announced by the British Government on July 27. For documentation, see Foreign Relations, 1964-1968, vol. VIII, Documents 66 ff.

Mr. Giscard d'Estaing said that he nevertheless feared a new crisis of confidence in sterling and he did not know how it could be handled. The British had now exhausted their drawing rights on the IMF. Moreover, even if there were someone willing to lend them the means to weather the storm, they could not forever keep going further into debt. They had already piled up more than $4 billion in debts in the last two or three years, which it was clear they would have a most difficult time paying off. They could turn to the United States for some help, but the result would be to put additional dollars into circulation which would flow, for example, to France, where it would be necessary to convert them into gold. France did not, of course, feel particularly troubled by the prospects of a crisis insofar as she herself was concerned. She was not a disturbing element in the international payments situation. Her trade account was in balance. While her balance of payments was in surplus, this resulted not so much from the current account as from the inflow of investments--above all American capital--and there was reason to hope that that inflow had moderated since the first quarter. She had ample reserves to carry her through the storm. The French authorities knew they did not have the responsibility for the management of the system. But they could not help regretting the failure of those who did--the reserve currency countries--to grasp the opportunity now presented to them to make reforms in the system and thereby avert disaster.

Mr. Deming recalled that if a new sterling crisis should arise, the British were not without the means to cope with it. In addition to the official reserves of the Bank of England in gold and foreign exchange, they had about $1.2 billion in U.S. securities, which, as the Minister knew, they had been putting into liquid form but none of which had yet been taken into their reserves. Part of these liquifying operations had already affected the U.S. balance of payments accounts, although it was true that the dollars in question were still in the hands of the British and had not yet been put into circulation. There were also the Anglo-American swap and the $250 million Export-Import Bank credit. We were of course aware that the use by the British of these facilities would mean putting new amounts of dollars into circulation, which might, as the Minister had suggested, come into the hands of France and other countries that would feel called upon to convert them into gold. At the same time, we were encouraged by the evolution of our own balance of payments. Mr. Deming said he had informed WP-3 and the Economic Policy Committee of the OECD that for the first half of the current year we estimated a deficit of $500 million on a seasonally adjusted basis, compared to about $1 billion in the first half of 1964 and $2 billion in the second half of last year. This $500 million did not of course include the French debt prepayment of $178 million, which we were glad the French had agreed should take place on July 1--that is, in the second half of the year. We had deliberately avoided making any forecasts regarding our balance of payments for the remainder of the year. In general terms, however, we expected that despite the less favorable seasonal factors in the second half, it would continue to show improvement as a result of the President's program.

Mr. Deming noted, with reference to the Minister's comments on the French balance of payments, that in the WP-3 and EPC meetings, the OECD Secretariat had forecast a considerable increase of the surplus, compared to 1964.

Mr. Perouse explained to the Minister that the forecast of the OECD Secretariat was for a surplus in 1965 of around $1 billion for the franc area as a whole. He said that the French experts thought that figure was too high. He reiterated the French analysis that the surplus arose less from the current account, which he described as showing only a modest surplus, than from capital inflows and from the overseas franc area. He emphasized the efforts of the French authorities to discourage capital inflows and labeled a part of the capital account surplus as the counterpart of the continued weakness of sterling.

Mr. Deming asked the Minister what he thought would be the outcome of the sterling crisis he foresaw.

Mr. Giscard d'Estaing replied that, speaking frankly, he thought devaluation of the pound would be inevitable if a crisis did in fact arise. The present Labor Government would certainly not survive any such foreign exchange crisis. Whatever the complexion of the Government that followed them, its first act would certainly be an adjustment of the exchange rate in order to get some breathing space in which to formulate its own economic program and in order to pin the responsibility for the devaluation on its predecessor.

Mr. Deming asked what the Minister thought would be the reaction of the Continent to a sterling devaluation.

Mr. Giscard d'Estaing replied that without question the Scandinavian countries would follow sterling to the full extent. The reaction of the Continent would depend upon the state of its own economic situation at the time the British move took place. If--as it seemed likely would be the case--economic activity on the Continent were rather slow, the tendency for most countries would be to follow the British.

Mr. Deming asked if the French authorities wanted to see sterling devalued.

Mr. Giscard d'Estaing replied that they emphatically did not. However, they feared that the consequences of a continued lack of confidence in the pound, both within and outside the sterling area, would leave the British monetary authorities no alternative.

Mr. Deming said that this seemed to us to argue that the United States, France and other countries which played an important role in the monetary system should do their best to insure that the British were not forced into such a corner. He asked how the Minister envisaged that reform of the international monetary system could help the British out of their difficulties.

Mr. Giscard d'Estaing said he was convinced that the burden of the sterling balances was such that confidence in sterling could never be restored, unless and until the British external accounts were relieved of that burden. The only way he saw to accomplish this objective was to "multi-lateralize" the sterling balances by consolidating them through some international institution and allowing the British to pay them off over the long term. Such a consolidation could be included as one feature of a reform of the international monetary system. If this reform also included measures to deal with the other problems of the present monetary system and was carried out in an atmosphere of calm deliberation rather than one of crisis, the consolidation would be greeted by the public as an important strengthening of the British position and would do much to restore confidence in sterling.

Mr. Deming said he had read with interest the account published in the Economist of a week or so ago on the Callaghan-Giscard talks. That article had mentioned the possible consolidation of the sterling balances.

Mr. Perouse interjected to say that while this possibility had been touched upon in the Callaghan-Giscard conversations, it had not been explored in any detail.

Mr. Deming expressed the view that working out an agreement on international monetary reform would require considerable time. He thought it very doubtful that anything could be concluded quickly enough to be of any assistance to the British in dealing with a new sterling crisis in the months ahead if that were indeed what was going to take place.

Mr. Giscard d'Estaing said that he had two points by way of conclusion. First, he had found the present exchange of views extremely useful and he hoped they could be continued on future occasions, either with Secretary Fowler or with Mr. Deming. Second, he wanted again to make clear the position of France in these international monetary matters. While she had done what she could to focus attention on the dangers she saw in the present situation, she realized that she did not have the responsibility for initiating and putting into effect a program to ward off those dangers. That responsibility belonged to the reserve currency countries. Now, they could attempt to consolidate the present system, and that seemed to be the import of the communiqu&#eacute;on the Fowler-Callaghan talks, or they could undertake a reform of the system. There was nothing wrong with consolidating the present system, provided it could be accomplished successfully. For their part, the French authorities thought reform would be the more prudent course.

Frederick L. Deming/5/

/5/Printed from a copy that indicates Deming signed the original.

51. National Security Action Memorandum No. 336/1/

Washington, August 6, 1965.

/1/Source: National Archives and Records Administration, RG 59, S/S-NSC Files: Lot 72 D 316, NSAM 336. Top Secret; Exdis. A handwritten notation reads: "Sir: this has been sent to S/S for appropriate action."

MEMORANDUM TO
The Secretary of State
The Secretary of Defense
Director of Central Intelligence
Director, U.S. Information Agency
Chairman, Atomic Energy Commission

SUBJECT
Potentially Embarrassing Activities in France or in Areas Outside France which are Controlled by France

1. All addressee agencies should take special measures to prevent U.S. activities in France which could needlessly embarrass United States relations with France.

2. A study should be made to provide a complete catalogue of activities with respect to France being undertaken or planned to be undertaken by the United States, whether covert, clandestine, or overt, that could be regarded as illegal or that could cause embarrassment to the United States if the French decided to make an issue of them. The report should be sufficiently detailed as to the nature, frequency and scope of operations, and personnel and equipment involved, to permit judgments to be made as to the implications thereof on U.S. foreign relations.

3. An illustrative list of some of the kinds of activities that should be included in the study is attached at Annex A.

4. It is desired that this study be conducted by the addressee Departments and Agencies, with the Secretary of State exercising supervisory coordination.

5. Matters of the kind normally handled by the 303 Committee will be treated in separate annexes in 303 channels.

6. It is desired that the final report be submitted by September 1, 1965./2/

/2/A September 9 memorandum from Benjamin Read to Bundy forwarded the reports of the Department of State, the U.S. Information Agency, and the Atomic Energy Commission. The memorandum and attached reports are ibid. Read noted that the reports of the Central Intelligence Agency and Department of Defense were forwarded through the 303 Committee. No copies of these reports have been found.

McGeorge Bundy

Attachment

[2 headings and 13 paragraphs (1 page of source text) not declassified]

52. Memorandum of Conversation/1/

Washington, December 15, 1965.

/1/Source: Johnson Library, Bator Papers, NATO-France. Confidential. Drafted by Stoessel. The meeting was held in the Treaty Room of the White House. The French Government announced that Lucet would replace Alphand on October 8.

SUBJECT
President's Comments to French Ambassador Lucet on Occasion of Latter's Presentation of Credentials

PARTICIPANTS
The President
His Excellency Charles Lucet, French Ambassador

Also present in the Treaty Room were:
His Excellency Michael Lukumbuzya, Tanzanian Ambassador
Mr. Valenti and Mr. Watson of the White House
Governor G. Mennen Williams, Assistant Secretary for African Affairs
Ambassador Lloyd Nelson Hand, Chief of Protocol
Mr. Walter J. Stoessel, Jr., Acting Assistant Secretary for European Affairs

During a brief conversation between the President and Ambassador Lucet when the latter presented his credentials on December 15 in the Yellow Oval Room, the President expressed his great pleasure at having Ambassador Lucet in Washington and said he looked forward to working with him. The President asked the Ambassador to convey his best wishes to General de Gaulle.

Following the formal presentation of credentials, the President met informally with Ambassador Lucet (and with the new Tanzanian Ambassador) in the Treaty Room. In his remarks to Ambassador Lucet on this occasion, the President noted that he had just read General de Gaulle's comments in this television interview concerning his attitude toward the United States./2/ The President observed that General de Gaulle had said that he was not anti-American in his views; the President was convinced that this was the case and that General de Gaulle's position had been exaggerated and misrepresented by the press. He thought that, while there were obviously differences between our two countries and our approach to problems, these were caused by differing appreciations of our national interests. The President was sure that "when the chips were down" France would be with us as, indeed, had been the case in the past. He recalled that France was our oldest friend and ally, virtually from the time when the United States was conceived, and he felt sure that we could continue to count on this.

/2/Reference is to an interview with Michel Drost of RDF broadcast on December 13, 14, and 15. For text, see de Gaulle, Discours et Messages, Vol. 4, pp. 412-440.

Minister Lucet said that he welcomed the President's remarks and was most appreciative of them.

53. Telegram From the Department of State to the Embassy in France/1/

Washington, February 21, 1966, 9:09 p.m.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 17 FR-US. Confidential. Drafted by McKillop and approved by Stoessel. Repeated to Geneva, Bonn, Brussels for the Embassy and USEC, Luxembourg, London, Rome, and to Paris for USRO.

4058. Following is based on uncleared memcon FYI, Noforn, and subject to revision:/2/

/2/Not found.

French Ambassador Lucet called February 21 at his request for tour d'horizon with Secretary in which following important subjects discussed: de Gaulle's press conference, Viet-Nam, NATO, and Kennedy Round.

1. De Gaulle's Press Conference:/3/ Noting he had not seen full text but only preliminary ticker reports, Lucet commented three things had struck him: (a) de Gaulle restrained on Viet-Nam emphasizing hope for peace; (b) de Gaulle constructive on European problem stressing fact satisfactory Luxembourg settlement/4/ should now open way for renewed EEC movement and political possibilities; and (c) de Gaulle had reiterated French position on NATO but without lending sense of urgency to issue.

/3/February 21. For text, see de Gaulle, Discours et Messages, Vol. 5, pp. 6-23. Extracts are printed in American Foreign Policy: Current Documents, 1966, pp. 316-317 and 381-383.

/4/Reference is to meetings of the European Community Council of Ministers at Luxembourg January 17-18 and 28-29, at which the Ministers accepted a compromise that achieved French demands that a rule of unanimity continue to govern Community decision-making and that limits be placed on the powers of the EEC Commission.

2. Viet-Nam: Secretary and Lucet exchanged views on respective US and French positions but indicated no new departures. Both agreed there are no lack of contacts with Hanoi. Secretary pointed out so far Hanoi consistently "hangs up the telephone" on any proposal for negotiations regardless of interlocutor.

3. NATO: Discussing NATO question in light of de Gaulle's press conference, Lucet stressed French intention to adhere to the Alliance even though GOF would wish to discuss changes in its implementation. He stated Paris still studying possible specific changes but so far without conclusions. Secretary replied we will not pass French, who are the demandeurs on this issue, and will wait until de Gaulle's views are more developed. The Secretary pointed out, however, we would not be interested in replacing present NATO multilateral structure with bilateral arrangements.

4. Kennedy Round: Secretary said he wished to stress importance we attach to making progress in Kennedy Round in order take advantage of far-reaching and broad mandate in Trade Expansion Act for mutually beneficial liberalization of world trade. It would be mistake to count on Congressional extension of act on present favorable basis if success not achieved. Thus golden opportunity could be lost.

Lucet stated Paris is aware of this situation. In his view GOF is quite willing to go ahead with Kennedy Round negotiations even though there may be many difficulties. Secretary replied technical difficulties, of course, must be expected but he hoped they would not be compounded by political ones on the French side. Lucet reiterated belief in French willingness to get on with Kennedy Round discussions.

Rusk

54. Telegram From the Embassy in France to the Department of State/1/

Paris, February 25, 1966, 1605Z.

/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, DEF 4 NATO. Secret; Immediate; Nodis.

5247. For Secretary From Ambassador. High-level Foreign Office source known to you this afternoon told McGuire that subsequent to my seeing Alphand this morning (Embtel 5243)/2/ de Gaulle saw Couve de Murville and issued peremptory instructions to him to prepare papers by 7 o clock tonight (1) denouncing all multilateral agreements connected with NATO except the North Atlantic Treaty itself,/3/ and (2) all military bilateral agreements with U.S.

/2/Telegram 5243 from Paris, February 25, reported Alphand's statement that a French position on U.S. facilities would be forthcoming. (Ibid., DEF 15-4 FR-US)

/3/For documentation relating to the French withdrawal from NATO, see Foreign Relations, 1964-1968, volume XIII.

Source continued that whether agreements were denunciable or not de Gaulle intended to denounce them. Later de Gaulle will be prepared to discuss with U.S. arrangements for facilities in France in the event of a war in which France would be willing to participate. Timing is not yet established but de Gaulle said possibly rather quickly, and certainly before his visit to Moscow.

While we have no reason to doubt authenticity of this information, which was relayed to source by Couve immediately on arrival at Quai from Elysee, it nevertheless is extremely curious. It counter-acts specifically and definitely de Gaulle's own statement in press conference that these changes would be accomplished progressively and that French allies would not suddenly be inconvenienced, and would seem to represent a sudden and abrupt change of his policy and tactics in this respect for as yet undisclosed reasons. In fact source said de Gaulle had changed his position in last five days, i.e., since press conference.

Source added that after denunciation issued, method and timing of U.S. withdrawal was less important to de Gaulle and presumably could be carried out in manner to minimize difficulties for us. Source described these decisions as a declaration of neutralism on the part of France. Will have further comments in subsequent telegram./4/

/4/Telegram 5260 from Paris, February 25. (National Archives and Records Administration, RG 59, Central Files 1964-66, DEF 15-4 FR-US)

Bohlen